House Hunting in Nicaragua

A colonial house with a courtyard in the centre of Granada: a cool US$1.3 million!

TODAY NICARAGUA This six-bedroom, six-and-a-half-bath house, known as Casa Blanca, is in the heart of Granada, Nicaragua, a small western city founded in the 1520s along the shore of Lake Nicaragua. The rich colonial heritage of the city, one of the oldest in Central America, is reflected in the stately architecture of this and other buildings.

Casa Blanca, a colonial house with a white concrete facade and a red-clay tile roof, was built in the 1750s for a wealthy family from Spain, according to Carlos E. Gutierrez, a broker for Nicaragua Sotheby’s International Realty, which is listing the property. The two-story house, with a two-car garage, is on the corner of the pedestrian-only Calle La Calzada, near the Granada Cathedral and Central Park, the bustling city center.

“It’s a pretty optimal location,” said Trevor Barran, the managing partner of the Sotheby’s affiliate, which opened for business last spring.

The current owners acquired the property about five years ago, Mr. Barran said, and they spent two years renovating and upgrading it, restoring myriad architectural details throughout the 6,000 square feet of living space. Those flourishes include coffered and vaulted ceilings with tongue-and-groove, or machimbre, paneling; wood molding; and encaustic floor tiles handmade locally. The furnishings, most from the Managua manufacturer Simplemente Madera, are included in the sale. Ornate wrought-iron gates enclose the doors to the two main entrances, which open to a large central foyer with a seating area, one of three designated living rooms. The ground floor also contains four guest bedrooms, three of which have en-suite baths, and a small en-suite bedroom suitable for staff off the modern kitchen. All the bedrooms except the staff quarters have air-conditioning, Mr. Barran said.<

The master suite, with a TV alcove and a spalike bath, encompasses the second floor. It includes a balcony that offers views of the cathedral and overlooks the home’s lush central courtyard. Nearly every room on the first level leads to the courtyard, which is landscaped with tropical foliage like aloe and ginger plants and features an open-air dining area and a 40-foot pool.

Granada, with a population of around 120,000, is about 28 miles from Managua, the capital. It is a 55-minute drive to the Managua airport and around three hours to the airport in Liberia, Costa Rica.

MARKET OVERVIEW

As Nicaragua’s past political turmoil has faded in memory, the country has become a popular tourist spot and a second-home destination, according to real estate agents.

The real estate market “really opened up” from 2002 to 2004, when there was “tremendous growth for the country,” said Mr. Gutierrez of Sotheby’s. By 2006, “the market was booming,” he said.

After the 2008 global financial crisis, “everything just went into hibernation,” he added.

But sales and prices have rebounded in the last four years, agents said. “People feel confident about the country,” said Carlos Gutierrez, a residential developer and an owner of Casa Granada Properties, a real estate agency based in Granada. (He is not related to Mr. Gutierrez of Sotheby’s.)

Home sales across Nicaragua are up, on average, 15 percent to 20 percent from a year ago, said Mr. Gutierrez, the developer. In Granada, “the rental market is also really growing,” he added, “because people want to try it out first before buying.” He estimated that rental volume in the city is up about 40 percent over the last five years.

Although prices in Nicaragua have been rising — doubling in some beach communities since 2007, according to agents — home values remain far lower than in neighboring countries like Costa Rica. (The price for a three-bedroom, fully renovated home in Granada, for instance, typically starts at around $170,000, according to Mr. Gutierrez, the developer.)

WHO BUYS IN NICARAGUA

Buyers from the United States, Canada and Europe have been active in Nicaragua’s housing market, particularly at the higher end, agents said, with most of them looking for second homes or development properties to hold and use.

“About 10 years ago people would just buy as an investment, but there are really no speculators anymore,” said Eduardo Cabrales, a lawyer based in San Juan del Sur, Nicaragua.

Granada has had an influx of expatriate retirees, agents said, because of the city’s affordable cost of living, along with its colonial charm, walkability and shops, restaurants and other amenities.

BUYING BASICS

There are no restrictions on foreign ownership, except for properties near the borders “for homeland security reasons,” Mr. Cabrales said. In fact, policies and laws encourage foreign purchases, such as a residency program that offers tax incentives to retirees, he added.

Foreigners, though, have fewer mortgage options available, so purchases typically are in cash, he said.

It is essential for buyers to hire a good lawyer, preferably one who can provide a reliable translation of the purchase agreement and be present at the closing on behalf of the buyer, Mr. Cabrales said. The lawyer will also need to conduct the necessary due diligence, which includes the key step of reviewing the title deed, or escritura, to ensure there are no liens against the property or ownership issues.

Each transaction typically involves just one real estate agent, who is paid a commission, usually by the seller, of 5 percent to 8 percent of the sales price.

There are various other fees involved in a transaction — these are typically paid by the buyer — such as a federal transfer tax of 1 percent to 4 percent of the assessed value of the property after it is registered to the buyer.

Other expenses include the annual municipal tax of 1 percent of the assessed value of the property, as well as fees for a lawyer and a notary (although many lawyers are notaries). The lawyer’s fee is typically 1 percent of the purchase price, Mr. Cabrales said.